Market's evolution 18 of July to 22 of July 2016

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Monday, 25 of July 2016

Market's evolution 18 of July to 22 of July 2016

Arranged to face the last week before vacation, but not before a review of everything that happened in the recent days. Despite the shortage of macroeconomic data, we had updates of relevant data as the leading indicators of activity levels. Similarly, we have had numerus publications of corporate earnings in the US, and we have followed closely the developments made in Turkey after the failed coup.

The focus was set mainly on the evolution of the Brexit.

Following recent communications, it seems that the activation of the Article 50 will not take place until next year. Also, the finance minister forecasts were not very encouraging recognizing that the exit from the EU will be a shock to the British economy. In addition, it reported that new monetary policy measures would be incorporated in autumn.

As for macroeconomic data released in the UK, a higher-than-expected retail sales falls for June (-0,9%) and weekly mortgages (-1,3%) have been recorded. In contrast, the Eurozone data was generally positive. Compound July PMI surprised upwards reaching (expansive) levels of 52,9 and a fall in consumer confidence lower than expected (-7,9).

The data released, supported the view that the ECB provided after the meeting last Thursday. Draghi kept the reference rate at +0% and determined that the QE program would be extended until March 2017. He specified that the evolution of the economy, although moderate, remains positive and a rebound is expected in price levels by the end of 2016.

In the US, selective indices were penalized after the publication of weekly requests for unemployment allowance which became worse than expected. As for corporate earnings publications, although beating expectations, in many cases those are not better than those from the previous quarters.

And in this context, we found the S&P500 in maximum levels (now around levels of 2.175 after scoring a timid advance of +0,61%). Instead, the Nasdaq Composite reached the 5.100 after pulling himself a +1.40. In contrast moderated gains in Europe and Asia; the German DAX maintained levels of 10.100 (+0,80%), while the EUROSTOX50 failed to move up to 3.000 levels (around the 2.972 now), meanwhile, the NIKKEI225 ended the week around 16.627 with a progress of + 0,78%.

With regards to the situation in Japan, we highlight the commitment of the Japanese Prime Minister Abe of rising up about 100 billion USD as a massive new fiscal stimulus, a factor that could distort (more if possible) the market sentiment.

Anticipating further stimulus, the yen depreciated against its major pairs closing around the 116,48 EUR/JPY. Similarly, the dollar rose about the common currency and is now trading at levels of 1,0973 EUR/USD.

As for raw materials, significant falls were recorded in the price of crude (-4%), so now trading at levels of 45,70 USD/Brent. In the ounce of gold, despite setbacks they were also recorded, these were milder (of -1%).